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American Bar Association - Defending Liberty, Pursuing Justice

Summer 2008

Vol. 4, No. 4

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Business Law

 

The Tentative Man

My first job after law school was in sales. Perhaps I earned some credibility with colleagues as a sales representative and a lawyer, and this, I surmise, is why one of my first clients came to me with a problem regarding unpaid sales commissions. At the time I took the case, I was building our website (still a work in progress), and my law partner Jeremiah Neville was filing papers with the secretary of state for Bradley|Neville Law Firm, LLC. I had always wanted to start a business and practice law with my name on the letterhead, and now it began: my first employment and contract law case.

It started with a soft knock on the door (figuratively speaking). The man who would later be my client approached me with a problem I’d never encountered before. I was tentative at first. I did not want to take on this man’s problem. I was not sure I could do it. So I turned him down. When he asked me again, a pending birth and a wife’s bed rest forced my hand: I needed to practice law. When we sat down to sign the contingent fee agreement, I was mute on the fact that as a new lawyer I hadn’t encountered most problems. As it goes, competence follows experience.

I went home that night with an honest-to-God case and a flesh-and-blood client. I had a stack of manila folders in my desk drawer for the occasion. I went downstairs to my makeshift basement office, pulled one out, and scrawled my client’s last name in felt-tip black on the cover. I did a quick conflicts check just to be sure: yes, the other folder had a different last name.

I opened the new file, put the executed agreement inside, closed the cover, and closed my eyes. What next? My client had already sent numerous emails. I opened my Google account and began running through them. Much of it was the extraneous gristle that sharp legal minds cut away, leaving enough for fact patterns and precedent. I cut off what I could and discovered that my client had been shorted thousands of dollars in commissions.

My client told a passionate story of grievance, unfair treatment, and Lady Justice. At the outset, the deal appeared quite large and outside his assigned business segment. Management encouraged him to pursue the deal anyway. He spent an extraordinary amount of time and energy on his work and closed the deal. It was worth thousands of dollars to the company (and thousands of dollars in earned commissions). Suddenly, the payout set in the compensation agreement looked too high, and the company decided to pay my client much less than his due. The company cited a provision in the agreement stating that its internal review board had final say as to how much he would ultimately be paid, on the basis that the deal was over a certain dollar-value threshold.

Sales representatives have a job that often requires as much “right place, right time” circumstances as preparation and hard work. Employers reward sales representatives handsomely for exceeding quota and driving growth for the company. But “right place, right time” circumstances are not contemplated under many agreements when signed—and thus not worthy of full commissions payment.

I asked experienced sales representative and friend Chad McDonald for insight, and he explained that sales is the lifeblood of any organization, but it’s very easy to decrease earned commission payments by one percent and add more to the bottom line. A company must attract high-caliber sales representatives with lucrative pay, but not so much that the company can’t turn a profit. My client closed the deal and expected his due, but the company disagreed, and a dispute was born.

Brozo v. Oracle Corp. 1 represents the issue well. On appeal, the majority stated that employers can determine (to a point) how much employees are paid, even if the amount of commissions paid differs from the agreement. 2 In his dissent, Judge Lay writes that any contract granting an employer sole discretion to determine how much to pay employees—after the deal has closed and the work is finished—is an illusory contract. 3 The tension lies between allowing companies discretion in awarding compensation and granting to sales representatives the benefit of the bargain originally struck in the agreement.

A company that wants more control over commission payments should include a provision in the agreement allowing for sole discretion to retroactively change commissions in prescribed circumstances. Make sure the provision contains express language to this effect. When Joe Closer really “kills it” (greatly exceeds quota in sales parlance), the company can prevent paying sales representatives too much money and minimize disputes.

Joe Closer should keep an open line of communication with management. Great deals are usually closed through plain hard work. Occasionally, companies will attempt to characterize the deal as windfall, or some other untoward business event, thereby warranting retroactive discretion to alter commissions. Joe Closer should confirm with the boss that he will be paid properly under the agreement as he works to close the deal.

This I learned after thorough legal research, demand letters, and negotiation. Fast-forward to several months later. I drove to the bank in Uptown and let my thoughts wander. I recalled scrawling my client’s last name on the manila folder in felt-tip black, drinking coffee at 11 in the evening, scratching the tension off my head, and thanking my wife for her sympathy. I reached the bank and parked the car. No longer the tentative man, I strolled inside, retrieved my law firm’s tax identification number, and sent it to opposing counsel so he could cut the settlement check.

I suppose I did just fine.

1324 F.3d 661 (8th Cir. 2003).

2 Id. at 667.

3 Id. at 672.

Chris Bradley is an editor at FindLaw, building websites for lawyers, and is the author of BradleyScribe, a blog of words. Chris can be reached at 651-808-0791 or .

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